Non-traded REITs have long been a popular income source for investors. However, choosing the right REIT can be a risky endeavor. In the case of NorthStar Healthcare Income REIT, recent events have led to a wave of complaints and investigations, leaving investors with substantial losses. Our law firm is currently representing investors who have filed claims against NorthStar Healthcare Income REIT to recover their losses.
The value of NorthStar Healthcare Income REITs has plummeted by over 30%, and the board has suspended payments to shareholders. Many investors have taken legal action against financial advisors and brokerage firms through class actions and FINRA arbitration.
If you or someone you know holds NorthStar Healthcare Income REIT, contact our attorneys at 1-800-856-3352 for a free consultation and to explore options for recovering your losses.
While complaints continue to pile up against NorthStar Healthcare Income for significant shareholder and investor losses, the processing and review of these allegations take time. In this article, we will discuss NorthStar Healthcare Income and Non-Traded REITs, and explore why numerous law firms are currently investigating them.
Why did Northstar Healthcare Suspend Dividends
Last year, NorthStar announced that it would cease dividend distributions. However, determining whether these distributions were a return on investment or a partial return of investment can be challenging for public investors. Financial advisors often fail to fully disclose the nature of these distributions, resulting in misleading explanations and inadequate disclosures.
Broker-dealer firms sometimes neglect to supervise sales practices, including appropriate disclosures and suitability of investments. Additionally, many financial advisors lack a complete understanding of non-traded REIT investments, leading to material misrepresentations and omissions that harm investors.
These practices are often driven by the high commission structure of investments like non-traded REITs. These structures benefit broker-dealer firms and financial advisors upfront while leaving investors with unsuitable investments that are poorly explained.
Definition of Non-Traded REITs
A non-traded REIT is a real estate investment in which the company shares are not listed on public exchanges. Northstar is a non-traded REIT that includes various properties such as multifamily properties, hotels, warehouses, and medical offices. Investors can benefit from the company's success through profit over time and rental income.
Pros and Cons of Non-Traded REITs
Non-traded REITs offer potential tax reductions and have the advantage of providing returns on real estate investments. However, they can be illiquid for extended periods. To address this, investors can explore options such as the secondary market or selling back to the REIT.
Despite the risks and potential for losses, non-traded REITs offer benefits for shareholders. They provide access to real estate investments with tax advantages that are generally unavailable to retail investors. These investments must be registered with the Securities and Exchange Commission and comply with IRS requirements.
Northstar Healthcare Income REIT Description
Northstar Healthcare Income Inc, also known as Northstar Income, focuses on acquiring, building, and managing a diverse portfolio of healthcare-related real estate equity, debt investments, and securities. Their primary focus is on senior housing, including nursing homes and old-age communities. They also invest in rehab clinics, hospitals, and other healthcare-related properties.
Northstar Healthcare REIT Investments
Investors interested in Northstar Healthcare Income REIT had to meet minimum standards, making it unsuitable for most potential investors. Additional requirements were imposed by several states before allowing investors to purchase shares. Financial and investment advisors highly recommended Northstar Healthcare, making unrealistic promises of high returns and the potential for the REIT to go public.
Northstar Value Decreases
In December 2018, Northstar's upper management reported a decrease in the value of their units by over 30% since the initial offering. This drastic decline in value came as a shock to shareholders who were not informed by Northstar portfolio management. The decline was attributed to factors such as employee cost increases, cash flow issues, and occupancy problems.
Investors Recovering Losses
Since 2015, Northstar Healthcare Income REIT has attempted to repay investors for their losses. However, the payments made only returned the initial investment without profits. This approach has sparked debate, as investors were not aware that they were not earning returns on their investments over time.
The company's financial data revealed that despite raising approximately $1.8 billion, total losses amounted to around $1 billion. In 2019, Northstar Healthcare Income REIT suspended dividend distributions to preserve capital, further decreasing the value of units.
Liquidating or Selling Northstar Healthcare Income REITs
Investors found themselves without regular distributions and stuck with illiquid investments. The only option was to find a third-party buyer on the secondary market and sell the REITs for a fraction of their initial purchase price. Bids for Northstar Healthcare Income REITs on the secondary market were as low as $1.50 or less.
Non-Traded REIT Lawsuits and Claims
Investors faced with significant losses may have legal options available to them. Depending on the situation and eligibility, investors can participate in a class action or file an arbitration claim. Although holding the REIT company accountable for losses can be challenging, financial advisors and broker firms have obligations to provide full transparency and appropriate recommendations to their clients.
In the case of Northstar Healthcare Income investors, many factors indicate potential legal action against financial advisors and broker-dealer firms. These firms likely misrepresented the REITs and failed to disclose the risks and nature of expected distributions. Investors who were misled or had inadequate information can hold these professionals accountable.
Who Is to Blame for Northstar Healthcare Non-Traded REIT Losses?
While there is debate about Northstar Healthcare's transparency, many aspects fall within their rights as a non-traded REIT. Non-traded REITs are inherently risky, and the governing board has the authority to change distributions and dividends. However, financial advisors and brokers may be held responsible for misleading investors and failing to provide full transparency about the risks.
Investigations and legal actions are being pursued by experienced lawyers and firms representing individual investors and groups who have suffered losses. Broker-dealer firms, including First Allied, LPL, Woodbury, Cetera Financial, and more, are being investigated. Reputable firms such as Levin Papantonio Rafferty, Sonn Law Group, Shepherd Smith Edwards & Kantas, Vernon Litigation Group, and The White Law Group are assisting investors in pursuing their claims.
If you have incurred losses due to the Northstar Healthcare Income Non-Traded REIT and believe your financial advisor or brokerage firm is at fault, you may be able to recover your losses through FINRA arbitration. Financial professionals have a duty to consider various factors before recommending investments, and those who failed to fulfill their obligations can be held accountable.
Losing money is never easy, especially for those who rely on steady income from non-traded REIT dividends. However, law firms are dedicated to holding professionals accountable for their irresponsible recommendations. If you have suffered losses, contact a reputable law firm to represent you in your case.
